Clems Antiques reproduces just three types of antiques. Those products are clocks, dinette sets, and bedroom suites. Although customers often ask Clem, the owner, to make other products, Clem does not intend to expand the product line. The planning group is developing its operating budget for the upcoming year. At the beginning of the year, Clems Antiques will employ 40 people who will work in the following areas: 15 in administration, sales and shipping; 2 in manufacturing supervision; 9 carpenters in manufacturing; and 14 manufacturing helpers. Carpenter hours required to make one Clock is 0.40 hours; one Dinette Set is 2.5 hours; and one Bedroom Suite is 6.5 hours. Production personnel have organized the work so that for each carpenter hour worked would require the support of 1.5 helper hours. Clems Antiques guarantees all employees their pay based upon 40 hours per week, regardless of the actual hours of work available that month. When employees are not doing their regular jobs, they undertake maintenance, training, community service, and customer relation activities. Each worker is expected to work up to 172 hours per month (based on approximately 4.3 weeks per month). If the company requires the workers to work overtime, they will be paid an overtime bonus of 50% of wages, meaning that the overtime wages are 150% of the regular hourly wage. For simplification purposes, place your idle time and overtime premiums in your direct labor budget. Clems Antiques Project 2 REQUIRED ELEMENTS FOR SUBMISSION: Prepare the following for the upcoming year on a monthly basis AND for the entire year for each of the following: (1) Sales budget (2) Production budget (3) Direct materials usage budget (4) Direct labor budget (5) Factory overhead budget (6) Administrative and marketing budget (7) Budgeted income statement using the Contribution Margin approach One of the purposes of the budgeting process is to encourage management to consider ways to improve profitability next year. Prepare a proposal for improving profits that: (1) Describe a proposed change in operations (sales, production, or etc) (2) Describe how the firm would realistically accomplish this change (3) Describe the impact of the proposal on the firms income statement (4) Describe the potential drawbacks to the proposal (5) Describe the overall recommendation as to whether management should implement the proposal Clems Antiques Project 2 Other financial and sales data for Clems Antiques consists of the following: Production Schedule for the upcoming year: Assume that the company follows a just-in-time philosophy and therefore the number of units sold each month is equal to the number of units produced. There is no change in inventory from month-to-month. Fixed Annual expenses for the upcoming year: Warehouse rent Other fixed manufacturing costs, including supervisory salaries Sales and administrative salaries Advertising $600,000 $840,000 $660,000 $600,000 Variable Annual expenses for the upcoming year: Direct Materials costs Clocks Dinette Sets Bedroom Suites $200 per unit $900 per unit $1,300 per unit Direct Labor costs Carpenters Helpers $24 $14 per hour per hour Packaging and Shipping costs Clocks Dinette Suites Bedroom Suites $15 $65 $135 per unit per unit per unit Variable Overhead Supplies, utilities and other $35 per carpenter hour (production only) Clems Antiques Project 2 Other financial and sales data for Clems Antiques consists of the following: Sales Forecast for the upcoming year: Month January February March April May June July August September October November December Clocks 1,020 1,191 1,179 1,195 1,200 1,204 1,194 1,199 1,222 1,219 1,207 1,192 Expected Selling Price $700 Dinette Sets 200 237 243 250 252 255 242 253 243 248 244 255 Bedroom Suites 109 110 109 126 122 125 123 121 127 126 126 119 $3,700 $6,500